Oct 6, 2006: Lab

ANNOUNCEMENTS

Midterm (test) #1 October 16th-19th
-Monday and Tuesday are FREE Days!
-Wednesday 18th $5 late fee
-Thursday 19th $7 late fee (start taking it by 11am)

Midterm (test/exam)
-multiple choice
-short answer
-essay

Reviews in the review room (13th of october)

NOTES

Supply and demand for ticket prices to a concert

Demand (buyer)

Price
150 |     |   \ 
100 |         |        50 |--------|    |        |  \ 
 25 |        |        |        |          +--------|--------------- Quantity
            50

Supply (seller)

Price$
    |              /
    |            /
    |          /
    |        /
    |      /
    |    /   
    |  /     
    |/       
    +----------------------- Quantity

Supply and Demand (together)

 
$    (S)             (D)
150 | \             /
    |   \         /
100 |     \     /
    |       \ /
 50 |-------/|    |     /  |  \ 
 25 |   /    |        | /      |          +--------|--------------- Quantity  
            50

where supply and demand lines meet is the price and quantity of equilibrium

Law of Demand: as price RISES, people buy LESS
Law of Supply: as price RISES, suppliers want to supply MORE

If price is too high, there will be a surplus because less people want to buy it.
If price is too low, buyers will want to buy more than the suppliers want to supply (due to scarcity)

Price meets at equilibrium

Slavery example

 $8 | \             /(S)
    |   \         /
 $6 |     \     /
    |       \ /
 $4 |-------/|    |     /  |  \ 
 $2 |   /    |        | /      |      \(D)
    +----------------------- Quantity  
     20  40  60  80 100

with increased demand
(D) shifts to right, so equilibrium price increases

 $8 |\   \          /(S)
    |  \ ->\      /
 $6 |    \   \  /
    |      \ / \ 
 $4 |       /\       |     /    \-> \ 
 $2 |   /        \       | /            \   \(D)
    +----------------------- Quantity  
     20  40  60  80 100

with increased supply (of slaves)
(S) shifts to right, so equilibrium price decreases

 $8 |    \          /   /(S)
    |      \      /   /
 $6 |        \  / ->/
    |         /\  /  
 $4 |       /   /    |     /   /    \ 
 $2 |   / ->/            | /   /            \(D)
    +----------------------- Quantity  
     20  40  60  80 100

Opportunity Cost
- The best foregone alternative
- Opportunity cost for attending lab?
- Opportunity cost of NOT attending lab?


Object

priority | activity
#        | 
3        | Attend Lab
2        | Work/Study
1        | Sleep
4        | Testing center

opportunity cost is the next best thing
If I sleep, I am giving up work/study

Specialization

Moses can produce  Becky can produce/day
-----              -----
3 cell phones      1 cell phone
6 keys             4 keys

if becky makes 1 cell phone she gives up the opportunity to make 4 keys
if becky makes 4 keys she gives up the opportunity to make 1 cell phone

O.C. of keys = 1 cell
             -------
               4 key
becki
OC of cell phone   = 4 keys
OC of making 1 key = 1/4 cells

moses
OC of cell = 2 keys
OC of key  = 1/2 cell

Comparative advantage (in terms of opportunity cost)
Becki has cheapest OC in making keys (OC is 1/4 cell)
Moses has cheapest OC in making cell phones (OC is 2 keys)

Miracle of exchange:
Specialize in whatever you have a comparative advantage in
Comparative Advantage: A product you can produce at the lowest opportunity cost

Key concepts from today:
* Supply and Demand curves
* Comparative advantage
* Opportunity cost
* Miracle of exchange